What If We Don’t Get Digital Advertising to Scale?

Digital advertising, both on the Internet and in traditional media, isn’t scaling. The buy and sell sides (advertisers and publishers) have neglected to get their platforms right in the advertising industry. If we don’t work this out in the next year or so, we could have big problems.

I have nothing against the outsourced ad operation industry per se, but it only exists because of a huge failing among tool vendors on both sides of the fence. There should be no reason for the vast number of agency or publisher staffers required to handle ad operations. There should be significantly more process automation and many fewer bodies to get the job done.

Companies like Operative and Ad Operations Interactive exist because ad platforms don’t automate everything they can. The bigger outsourced operation companies have built tools and technology that streamline the ad operation process, or they use cheap labor and extensive processes to ensure no mistakes are made.

Is it a coincidence that many tool vendors have their own outsourced ad operation teams? It shouldn’t be lost on anyone that outsourced ad operations can be a big revenue generator — and that it may not be in vendors’ best interest to completely automate these solutions.

On the agency side, pressure was never put on tool vendors to streamline and automate the tools because of billing methods. Agencies typically bill out for ad operations on an hourly rate This helped interactive departments become profit centers. They didn’t mind throwing bodies at the problem, so long as advertisers were willing to pay the bills.

Things are changing fast. Digital advertising is growing quickly. A problem that could be handled by humans is now overwhelmed by volume. This is the dark side of online advertising success. And it will kill the industry.

Online advertising can’t handle another few billion dollars of volume with the tools in place today. In my column about this in June 2005, I wrote:

So this column is a call to the technology providers to take their cues from the upshift in the current market landscape. Technologies languished during the past few years of market downturn. Most, frankly, are sorry shadows of the promise we saw back in 2000. The core technologies we built to serve ads, plan and manage campaigns, handle sales, implement insertion orders, and, perhaps most important, report results have been underfunded long enough. The industry must begin to focus on these platforms with an eye to the media future. It must create technologies to easily handle the transition to nonlinear video (and audio) ad insertion and become ready to handle the media shift.

It’s been over a year, and nobody’s stepped up to the plate. What’s happening? Huge ad operation staff attrition at agencies. Increasingly more outsourcing to companies like Operative, which have the processes and workflow automation in place to scale. This problem isn’t just about the current online advertising industry. It’s about scaling the future of advertising across all digital media. We’re not ready.

It’s time to get this fixed. Fast.

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